Mortgage Lending and Financial Stability in Asia

20 Pages Posted: 12 Oct 2015

See all articles by Peter Morgan

Peter Morgan

ADBI

Yan Zhang

Asian Development Bank Institute

Date Written: October 12, 2015

Abstract

This paper presents estimates of the effect of the share of mortgage lending by individual banks on two measures of financial stability — the bank Z-score and the nonperforming loan ratio. The sample covers 212 banks in 19 emerging Asian economies for 2007-2013 from the Bankscope database. The findings suggest that mortgage lending is positive for financial stability, specifically by lowering the probability of default by financial institutions and reducing the nonperforming loan ratio, at least in noncrisis periods, for levels of mortgage shares up to 30%-40%. For higher levels of mortgage lending shares, the impact on financial stability turns negative. Mortgage lending can also be a useful measure of both financial development and financial inclusion.

Keywords: Financial stability, mortgage loan ratio

JEL Classification: G21, O16, R3

Suggested Citation

Morgan, Peter J. and Zhang, Yan, Mortgage Lending and Financial Stability in Asia (October 12, 2015). ADBI Working Paper 543, Available at SSRN: https://ssrn.com/abstract=2672776 or http://dx.doi.org/10.2139/ssrn.2672776

Peter J. Morgan (Contact Author)

ADBI ( email )

Kasumigaseki Building 8F 3-2-5
Kasumigaseki, Chiyoda-ku
Tokyo, 100-6008
Japan

Yan Zhang

Asian Development Bank Institute ( email )

Kasumigaseki Building 8F
3-2-5, Kasumigaseki, Chiyoda-ku
Tokyo, 100-6008
Japan

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